Powerful cyclone bears down on Australia's top iron ore port

PERTH Tue Feb 26, 2013 4:31pm EST

PERTH Feb 27 (Reuters) - A powerful cyclone headed for Australia's Port Hedland, which handles a fifth of the world's seaborne-traded iron ore, stalled off the coast but was set to make landfall later on Wednesday with destructive winds and flooding.

Cyclone Rusty is expected to reach Australia's northwest coast by Wednesday evening and has already closed the three main iron ore ports in the Pilbara region, the world's largest source of iron ore.

Rusty could strengthen to a category four storm -- on a scale of one-to five -- by the time it reaches the port, according to the Bureau of Meteorology. The bureau predicts the storm will come ashore just to the east of Port Hedland.

BHP Billiton , Fortescue Metals Group and Atlas Iron are forecast to ship more than 275 million tonnes of iron ore this year, or 750,000 tonnes per day, through Port Hedland.

The weather bureau said the cyclone had been almost stationary overnight about 100 km (60 miles) off the coast, but was expected to strengthen and track south during the day.

"This is a large tropical cyclone and its slow movement is likely to result in an extended period of destructive winds near the track, with rainfall that is heavier than that associated with a typical system," the weather office said.

Dangerously high storm tides and flooding were likely, it added.

Residents in low lying coastal areas had been evacuated, with local media reporting a run on canned food and emergency supplies such as water, batteries and flashlights. About 14,000 people live in Port Hedland and adjacent South Hedland.

The ports of Dampier and Cape Lambert, about 200 km (120 miles) south of Port Hedland and used by Australia's biggest iron ore miner Rio Tinto , have also been closed as a precaution.

Rio Tinto is targeting shipments of 260 million tonnes of ore through these ports this year.

Iron ore prices have pulled back to just under $152 a tonne since hitting a 16-month peak of $158.90 last Wednesday.

A weaker category one system which passed the Pilbara in January forced the shutdown of all three iron ore export terminals, contributing to a nine percent drop in exports for the month and a 5.2 percent rise in spot prices.

Iron ore exports were worth around $60 billion a year to Australia, the vast majority shipped through ports in the Pilbara.

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